Policy Priorities

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BUDGET WATCH: THIS WEEK...

July 28, 2011

House Set to Vote on Debt Ceiling as Senate Prepares Alternative Bill

With August 2nd now just a week away, Congress remains at an impasse over a course of action to ensure that America does not default on its bills. After negotiations between the President and Congressional Leadership broke down over the weekend, Senate Majority Leader Harry Reid (D-NV) and Speaker of the House John Boehner (R-OH) introduced competing proposals earlier this week to raise the $14.3 trillion debt limit while reducing the deficit.

These two proposals offer different visions of how to spare the nation from default next week. The first, proposed by House Speaker Boehner, would require massive cuts in discretionary spending followed almost immediately by a second round of even larger cuts from Medicaid, Medicare, Social Security, and Food Stamps that would hit the most vulnerable children and families hardest, even as the rich and rich corporations continue to enjoy lucrative tax breaks. Specifically, Boehner’s proposal would immediately increase the debt ceiling by more than $900 billion through spending cuts that include capping discretionary spending. This short term increase in the debt ceiling would require another vote to raise the debt ceiling within the next six months, and would be contingent on passage of an additional $1.8 trillion in cuts.

The president of the widely respected Center on Budget and Policy Priorities, Robert Greenstein, has called the Boehner proposal a form of “class warfare” that, if enacted “could well produce the greatest increase of poverty and hardship produced by any law in modern U.S. history.”

Tonight, the House of Representatives will vote on Speaker Boehner’s proposal, and later this evening, the Senate will hold its own vote on the legislation. The outcome of the House vote is unknown, but it is expected to be defeated in the Senate, where 53 Senators have gone on record in opposition, and President Obama has already issued a veto threat.

The second proposal, authored by Senate Majority Leader Reid (D-NV) is similarly imbalanced in that it does not seek fair contributions from those most able to pay, but its cuts would be less targeted to the poor and most vulnerable. Reid’s proposal would reduce the deficit by $2.7 trillion, without making cuts to entitlement programs (Medicare, Medicaid and Social Security) and without changes to revenues. Of the $2.7 trillion in cuts:

  • $1.2 trillion comes from discretionary spending cuts, including both defense and non-defense spending.
  • $100 billion comes from mandatory savings that were negotiated by Democrats and Republicans participating in the negotiations led by Vice President Biden. These savings do not come from Medicare, Medicaid, or Social Security benefits, but include: savings garnered by reducing fraud and abuse, reforms in Fannie Mae/Freddie Mac, spectrum sales, agricultural reforms and reforms to higher education that would then be reinvested to sustain the Pell Grant program.
  • $1 trillion comes from savings from winding down the wars in Iraq and Afghanistan.

No date has yet been set for a vote on this proposal.

In addition to voting on legislation to address the debt crisis, the House will vote tomorrow on two balanced budget amendments that would have devastating implications for children and families. Learn more about the balanced budget amendment legislation and its impact on children with our new fact sheet.

The budget situation continues to change by the hour, so stay tuned to Children’s Budget Watch for the latest!

Click here to view past Budget Watch updates.